By Esha Agrawal
We go on travel with our families, but what if we can save our taxes? Here’s a sneak peek to the LTC exemption rules.
Leave Travel Concession (LTC) is basically defined as the cost of travel granted to employees to travel anywhere in India, while on leave from work. However, this may vary from company to company as per their internal policies. The tax exemption on LTC is allowed twice in a block of four calendar years. These blocks of 4 years have been predefined by the government. These are 2002 – 2005, 2006 – 2009, 2010 – 2013 and so on. The current LTC block is 2014 – 2017. So, for the period 2014-17, one can claim this exemption for any two occasions.
However, one important thing to note is that these years are calendar years, and not financial years.
Points to Note
- In case the LTC is encashed without performing the journey as per the company’s policy, the entire amount received by the employees would be taxable.
- Family for this purpose includes:
a) The spouse and children of the employee
b) Parents, brothers and sisters of the employee, who are wholly or mainly dependent on him.
- The exemption is allowed only in respect of fare. Expenses incurred on conveyance from residence to the railway station/airport/bus stand and back, boarding and lodging or expenses during the journey will not qualify for exemption.
- Exemption is available in respect of shortest route.
- Exemption available only in respect of two surviving children after 1.10.1998.
Ceiling Limits for LTC Exemption
The exemption shall be available subject to the following:
- If the journey is performed by air : An amount not exceeding air economy fare of the national carrier by the shortest route to the place of destination will be exempt.
- If the journey is performed by rail : An amount not exceeding AC first class rail fare by the shortest route to the place of destination will be exempt.
- If the place of origin and destination of journey are connected by rail but journey is performed by any mode of transport : An amount not exceeding AC first class rail fare by the shortest route to the place of destination will be exempt.
- If the place of origin and destination of journey are not connected by rail (partly/fully) and the journey is performed between such places: An amount not exceeding 1st class or deluxe class fare (if recognised public transport system exist) , A.C. first class rail fare ( if no recognised public transport system exist) by the shortest route to the place of destination will be exempt.
Exemption, will however, in no case, exceed the actual expenditure incurred on the performance of the journey.
How to make a claim ??
- Give a written declaration to your employer with travel details and the amount spent.
- Tickets like railway ticket and airlines ticket (with boarding pass) is valid proof for claiming LTC benefit. As per the Supreme Court ruling, if you submit a declaration stating the amount you spent, you don’t need to give the actual bills. But it is recommended you keep the tickets handy in case your employer or the tax authorities such as Assessing Officer need to see it later or to satisfy themselves about the genuineness of the claim.
- Your employer will certify the LTC exemption in Form 16.
FAQ On Leave Travel Concession (LTC)
Q- Under which Income Tax Act section LTC exemption comes?
A – The exemption comes under Section 10(5) of the Income Tax Act.
Q – If you have not availed LTC in one block, can you carry forward LTC benefit ?
A – Yes, The exemption doesn’t lapse – it can be carried forward to the next block of 4 years.The only condition in this case is that the exemption has to be availed in the very first year of this subsequent block.
Q – Can Husband and wife both claim LTC benefit ?
A – Yes, both the Husband and wife can effectively claim LTC benefit 4 times in block of four years . ie two by husband and two by wife. However, both of them cannot claim for the same journey.
Q – If a person lost the boarding passes. What are the alternatives ?
A – Ask the airline company to issue a letter about your travel. This letter will be sufficient in case Income tax department ask for the proof.
Q – If a person travelled two times in a year Oct-14 and Dec-14, and have not availed any LTC benefit before (2014-2017 block or 2018-2021 block). Can that person avail LTA benefit for both travels ?
A – Yes, that person can take benefit of both travel in this block year.
Q – Is International travel permitted?
A – No, LTC covers only domestic travel.
Q – Can LTC be claimed if the actual claiming person has not travelled?
A – No, LTC cannot be claimed for the family if you as a claiming person are not included in the travel.
Happy Travelling and Tax Saving.